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Suppose that you have a job paying $50,000 per year. There is a 5% probability that next year your wage will be reduced to $20,000

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Suppose that you have a job paying $50,000 per year. There is a 5% probability that next year your wage will be reduced to $20,000 for the year. 3 a. What is your expected income next year? 3 b. Suppose that you could insure yourself against the risk of reduced consumption next year. What would the actuarially fair insurance premium be

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